Lawmaker calls for resignation of IRS Chief as Tax Preparers fall under the Microscope

May 18, 2022

Rep. Bill Pascrell (D-N.J.), the House Ways and Means Oversight Subcommittee Chairman, called for the resignation of IRS Commissioner Charles Rettig because a government report exposed the dismal performance of the tax agency, which could wind-up biting tax preparers.

“Deliberate sabotage – that’s what I’m calling it – has created an agency that cannot process returns, cannot correspond with taxpayers quickly, cannot even answer the telephone calls for help. This IRS is failing to modernize and prepare for the future… These failures is why I have called on the President to fire the Commissioner,” Pascrell said during his May 18th Subcommittee's hearing on the IRS's performance.

The Congressman did not explain his reference to “deliberate sabotage,” but in the past there was some evidence that the IRS purposely mishandled operations to pressure Congress into appropriating it more funds. The controversy was the subject of past congressional hearings. 

Today's report, authored by the Government Accountability Office (GAO), found that IRS audit rates decreased across all income categories, but dropped the most for taxpayers earning at least $250,000 because it takes more agency resources to audit wealthier taxpayers.

However, audit rates for taxpayers claiming the Earned Income Tax Credit (EITC) were found to be higher than average because “EITC audits require relatively few resources and prevent ineligible taxpayers from receiving the EITC,” according to the report.  

The GAO report was covered extensively by the tax press and today’s Roundup includes many of those articles. A link to the post is here.

Blame the Tax Preparer:

Committee Members in both parties said the IRS could improve operations if it had oversight and regulatory authority over tax preparers.

“Part of the problem is we have people preparing tax returns who aren’t qualified or maybe not ethical,” said Rep. Tom Rice (R-S.C.), the Subcommittee’s Ranking Member.

Rice and Rep. Jimmy Panetta (D-Calf.), who also sits on the House Ways and Means Committee, introduced the “Taxpayer Protection and Preparer Proficiency Act.”

According to the bill's summary, it:

[R]equires tax preparers to demonstrate competency in preparing returns, claims for refund, and associated documents.  The legislation also requires preparers to complete continuing education requirements.  Additionally, the IRS would be given the authority to rescind taxpayer identification numbers (PTINs) of preparers found to be incompetent or fraudulent.

“That [bill] would allow the IRS to regulate the folks who are preparing these returns,” Rice said today.

James McTigue, Jr., the GAO’s Director of Strategic Issues who testified before the Subcommittee, said his organization supports allowing the IRS to regulate tax preparers.

“We fully endorse that,” he said.

The GAO in 2014 tested the accuracy of roughly 20 tax prep firms and only one provided an accurate answer to the test question. Meanwhile, all firms earned a living.

“The fees that were charged were… substantial fees,” McTigue said.

It is not likely that an IRS bill will be passed in the current Congress. It is not currently on leaderships’ radar. Also, lawmakers will soon be focused on the election, at which point passing legislation becomes a lesser priority when compared to getting re-elected.

1099 K:

Committee members in both political parties called to reverse the new compliance rules for filing 1099 Ks to pre-2022 requirements. It is unclear if these calls will come to fruition in the current Congress.

End of Hearing:

Chairman Pascrell ended the hearing without saying what his next steps will be regarding reversing the IRS’s lackluster performance.  

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